Asset Prices, Heterogeneous Expectations, and Limited Short Sales
AbstractThis paper extends the Harrison-Kreps model by allowing limited short sales. The main results of this paper are: (1) investors pursue short-term gains when perceiving heterogeneous expectations; (2) important properties of the equilibrium price in the Harrison-Kreps model still hold even when limited short sales are allowed; (3) an increase in the dispersion of expectations about future dividends raises the risky asset price; and (4) an increase in short-sale costs also raises the risky asset price.
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Bibliographic InfoPaper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0308.
Length: 27 pages
Date of creation: Jul 2003
Date of revision:
Heterogeneous expectations; Dispersion in expectations; Limited short sales; Short-sale cost;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-CFN-2003-09-14 (Corporate Finance)
- NEP-FIN-2003-09-14 (Finance)
- NEP-FMK-2003-09-14 (Financial Markets)
- NEP-RMG-2003-09-14 (Risk Management)
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